Florida braces for big comp rate hikes

With no legislative fix in sight, Florida employers may face skyrocketing workers compensation rates as a result of recent state Supreme Court rulings.

The Florida Supreme Court earlier this month invalidated the state's temporary total disability provision, ruling in Bradley Westphal v. City of St. Petersburg et al. that limiting benefits to 104 weeks is unconstitutional and creates a system that “no longer functions as a reasonable alternative to tort litigation.”

Six weeks earlier, the same court ruled in Marvin Castellanos v. Next Door Co. et al. that Florida's attorney fee schedule is unconstitutional, as it hinders an injured worker's ability to obtain legal representation.

To cover the projected impact of Castellanos, the National Council on Compensation Insurance Inc. subsequently proposed a 15% statewide average rate increase. A 1.8% increase stemming from a new health care provider reimbursement manual would bring the total to 17.1%, or $623 million, according to the Boca Raton, Florida-based rating and research organization. Now NCCI is evaluating the ruling in Westphal “and will provide further details upon submission of any amended rate filing to the Florida Office of Insurance Regulation,” a spokesman said in an email.

“It's hard to speculate as to what that figure might be, but I think it's going to be much lower than the 15%” rate increase related to Castellanos, said Trey Gillespie, Austin, Texas-based senior workers compensation director at the Property Casualty Insurers Association of America.

Carolyn Johnson, director of business economic development and innovation at the Florida Chamber of Commerce in Tallahassee, agreed that Westphal won't have as big of an effect on Florida businesses since “it only really impacts the most severely injured employees.”

Bradley Westphal, a firefighter and paramedic for the city of St. Petersburg, sustained severe occupational injuries to his back and knee in 2009, court records show. Not having reached maximum medical improvement, he sought permanent total disability benefits after exhausting 104 weeks of temporary total disability, but a Florida judge of compensation claims denied his request, saying he fell into a “statutory gap.”

In September 2013 in an 8-3 en banc ruling, Florida's 1st District Court of Appeal in Tallahassee said injured workers should be able to receive permanent total disability benefits if they remain totally disabled at the end of the 104-week limit on temporary total disability. Despite the appellate court “valiantly attempt(ing) to save the statute from unconstitutionality,” the Florida Supreme Court ruled 5-2 earlier this month that the limit is unconstitutional and granted Mr. Westphal 260 weeks of temporary total disability benefits.

“The decision, in some ways, begs for additional clarification” since it “potentially created another statutory gap — albeit farther down the road than what would occur in the 104-week limitation period,” Mr. Gillespie said.

Injured workers in Florida were entitled to 350 weeks of temporary total disability until the legislature reduced it to 260 in 1990 and 104 in 1994.

Considering that most workers comp claims are medical only, meaning they don't involve lost time, most injured workers don't reach 104 weeks of temporary total disability benefits, said Tammy Perdue, general counsel of Tallahassee-based business association Associated Industries of Florida.

Citing NCCI data, Ms. Perdue said the average number of days away from work was 57 from 2004 to 2009 and 67 from 2001 to 2003, far less than the five years of temporary total disability benefits the state Supreme Court has deemed necessary, she said.

The 260-week duration will cause employers to evaluate their safety programs and how they manage severe claims, said Tom Ryan, workers compensation market research leader of Marsh L.L.C.'s Workers' Compensation Center of Excellence in New York. The additional 156 weeks “will create a lot of increased awareness and, hopefully, new practices will emerge.”

But any midyear workers comp rate increase could take a toll, particularly on small businesses, which are responsible for two of every three jobs in Florida, said Ms. Johnson of the Florida Chamber of Commerce.

“Small business might not have even been aware that there were these court cases out there and, all of a sudden, they might have a, let's say, 20% rate increase,” Ms. Johnson said. “It's really going to impact their bottom line. It could mean the difference in hiring a new employee or offering raises, offering bonuses. It just depends on the small business, if they're barely getting by or if they have money in reserves.”

Some attorneys have said the decision in Castellanos to eliminate statutory caps on claimant attorney fees could lead attorneys to “convince people ... (to) try to extend their maximum medical improvement to continue to receive the benefits,” Ms. Johnson said.

Litigating more claims or keeping them open longer would increase attorney fees.

Lawyers for Mr. Castellanos, who suffered cuts on his head, neck and right shoulder during a 2009 altercation with a Next Door Co. co-worker, secured $822.70 in workers comp benefits, but received only $1.53 per hour for 107.2 hours of legal work, according to court records.